Cautionary Note for Mobile Payments

Over the last year, the buzz in the world of credit, debit and online payments has been the technology that eliminates the need for a physical credit card. Mobile payments are
one of the most exciting new developments in decades and tremendous growth is expected worldwide. The advantages of using a smart phone for credit and debit purchases are touted by both credit card issuers and phone companies alike. But many questions still remain about security.

According to Juniper Research, mobile payments are expected to grow from $240 billion
this year to $670 billion worldwide in 2015. But while mobile payments are dramatically on the rise, analysis by Consumers Union presents a cautionary note.

Mobile Security vs. Bank Security

Unlike banks and credit card issuers, protection against fraudulent mobile activity varies between wireless carriers and the terms of individual cell phone contracts. Banks, on the other hand, provide in-depth security to cardholders which is heavily regulated, and in most cases, required by law. For example, when a cardholder discovers unauthorized purchases made by someone using their credit card, they will only be liable for a maximum of $50 of the fraudulent charges. Fraudulent payments made on a tablet or smart phone do not have the same protections, and in some cases, the account holder may be liable.

Last spring, the Consumers Union called out some of the largest mobile phone carriers in the nation – AT&T, Sprint, T-Mobile, and Verizon included – in an effort to ramp up their protection policies. But months later, the carriers are still falling short of what consumers need, the group says. Cell phone carriers offer limited protection for problems such as billing errors (most only give you 60 days to report an error) and some, like AT&T, Sprint and T-Mobile, only protect users after they’ve reported their phone stolen.

Banks offer a 10-day limit for any investigation regarding a fraudulent transaction for pre-paid card holders before issuing a refund. Mobile carriers don’t make any guarantees you’ll be refunded at all, Consumers Union says.

“As new mobile payment options become available, consumers are better off sticking to services linked to credit cards or debit cards, which come with strong protections required by law,” said Michelle Jun, senior attorney for Consumers Union.

“If wireless carriers want consumers to have confidence in direct carrier billing programs, they should strengthen their contracts with the protections consumers need.”